Persian Gulf Slowdown Washes Up on India's Shores

By

Yaroslav Trofimov

Updated Feb. 26, 2009 12:01 a.m. ET

KADUKUTTY, India -- Last December, a day after returning to Dubai from his lavish wedding ceremony in this Indian village, Gilson Rodrigues was jolted out of newlywed bliss. Because of the global recession, management told him, he was laid off from his job cleaning rooms in a four-star hotel.

For a month, Mr. Rodrigues unsuccessfully sought another employment in the Persian Gulf emirate. He's now back in the village, nestled among coconut groves in the southern Indian state of Kerala, and is eking out a living as a day laborer on local farms.

"I had a lot of dreams when I went to Dubai," says Mr. Rodrigues. "Now, all my dreams are broken."

The 29-year-old belongs to a growing stream of forced returnees to Kerala, once heralded as a model for developing economies. But this tropical state of 32 million people is uniquely dependent on income from the Gulf: Kerala contributes about half of the five million Indians working in the one-time El Dorado that's now hammered by sinking oil prices and a construction industry bust. The estimated $6 billion a year that Kerala's Gulf-based expatriates send back to their relatives accounts for a staggering quarter of the state's economy, or twice its government budget.

ENLARGE

Indian workers, here taking a break at a construction site in Sharjah, United Arab Emirates, have been returning to India as overseas jobs disappear.
Yaroslav Trofimov/The Wall Street Journal

"Every family here has someone in the Gulf," says Kerala's finance minister, T.M. Thomas Isaac, whose four siblings live in the United Arab Emirates, a federation that includes Dubai.

Kerala officials say they don't know how many workers have already returned, and how many more are on the way. But Chacko T. Varghese, general secretary of the Kerala Manpower Exporters Association, a trade group uniting firms that recruit for Gulf-based employers, calculates that about 500,000 workers will be forced to return to Kerala in a few months.

"Everyone is afraid. There is no money in the market, and we've had no business for the past three months," says Mr. Varghese's business partner, Mohammad Nasir, as he greets a visitor in the deserted offices of his People's Manpower Supply firm that overlooks a construction site in the U.A.E. city of Sharjah.

Pessimism runs even deeper in neighboring Dubai, where C.R.G. Nair heads the United Malayalee Association, a group of Kerala migrants' social clubs. "The situation is really bad. Major clients are stopping or canceling projects, and payments are not being released even after 160 days," says Mr. Nair, whose day job is head of finance at a company that supplies fire-protection equipment to builders. His bills to some of Dubai's biggest developers have been overdue since August, he says.

The crisis in the Gulf comes as India's economy, which grew more than 9% during each of the past three years, faces a slowdown. Though the full force of the global economic woes hasn't hit India, the collapse of the Gulf market for labor is depriving many Indians of a quick route into the middle class via better-paying jobs abroad.

These dynamics are playing out with particular severity here in Kerala, a Communist-ruled state where the economy has become intertwined with the fate of oil-rich Gulf monarchies over the past three decades.

Because of the Communists' development policies, the state's literacy rate is more than 90%, compared with just over 60% in the rest of the country. There is a price, however: Kerala's militant labor unions, frequent protests and strikes, combined with the ruling party's anti-Western rhetoric, have scared off many investors, stunting the state's economic progress.

"We have the education here, but we have no industry," says E.S. Jose, a prominent businessman who until recently headed Kerala's Chamber of Commerce and Industry.

The solution has been to export Kerala's literate labor to the Persian Gulf, a region linked to Kerala's coastal cities through centuries of trade.

This export of labor "has been a big safety valve for Kerala," says Mr. Isaac, the finance minister. "While job expectations have risen with the education, we haven't been able to provide quality jobs."

An economic downturn caused by a fall in remittances from the Gulf and a large-scale return of Kerala migrants, he cautions, "could lead to serious unrest among the people."

Kerala had to cope with a similar crisis following the Iraqi invasion of Kuwait in 1990, when virtually all of Kuwait's expatriate Keralite population was evacuated to India. The current situation, however, is more challenging, Mr. Isaac says: "Unlike that period, now every Gulf country will be sending our people back." As part of the state's new budget, Mr. Isaac is earmarking $20 million for projects to help returnees from the Gulf.

ENLARGE

Gilson Rodrigues

Skilled workers laid off in the Gulf, such as carpenters, plumbers, painters and administrative staff, are unlikely to find similar jobs in Kerala, employers say. And for many of these returnees -- such as Mr. Rodrigues, the former Dubai hotel worker -- this sudden repatriation is little short of a personal tragedy.

Mr. Rodrigues grew up with his mother in Kerala while his dad, Francis, labored on construction sites in Saudi Arabia. His sister lives in Kuwait.

After heading to Dubai, Mr. Rodrigues found a relatively lucrative job at the Majestic Hotel, a four-star establishment with marble floors and a largely European clientele.

Mr. Rodrigues says he was given free lodging and paid 1,450 U.A.E. dirhams a month, or about $400, plus occasional tips. The hotel was usually full at the time, as Dubai became one of the hottest destinations for European tourists lured by the emirate's beaches and shopping malls. He planned to stay there for at least six years, saving enough money to buy a home in his village. "There is no chance to make money in Kerala -- all the people are going to other countries for that," Mr. Rodrigues says.

His prestigious status as a Gulf expatriate, Mr. Rodrigues says, convinced the parents of his wife, 23-year-old Densil, also from the Kadukutty area, to agree to a wedding. Last fall, he took his annual leave and threw a marriage ceremony for 500 guests, spending his savings and money borrowed from friends on the reception. Then, on Dec. 8, Mr. Rodrigues left a pregnant Densil in the village and flew back to Dubai, hoping to quickly replenish his bank account.

He says he was stunned when he was told by the hotel's management just hours later that he was no longer needed, a casualty of the downturn in tourism that slashed occupancy rates at Dubai's hotels. Several other staff were dismissed on the same day.

For a month, while his visa was still valid, Mr. Rodrigues knocked in vain on the doors of dozens of Dubai hotels. Failing to find any job in the U.A.E., he returned to Kerala in January, unable to repay wedding debts and sustaining himself and his wife with odd jobs that earn him a couple of dollars a day.

"My wife's family is shocked and angry," he says, sitting in a friend's home, the only light provided by a hand-held lamp during one of the village's frequent power outages. "They agreed to the marriage because I was something, I was in the Gulf. But now I'm nothing."

Instead of buying a home, Mr. Rodrigues and his wife rent a small apartment in Kadukutty, its living room dominated by an extravagant shrine topped by a likeness of Jesus.

"I'm happy that my husband is here and is available to help me whenever I need it," Ms. Rodrigues says. "But it's very tough without money. What I want is for him to go back to Dubai and find another job."

To help, Mr. Rodrigues's 56-year-old father, Francis, has applied for a construction job in Saudi Arabia, even though he's suffering from chronic back pain after his previous stints there. He's not optimistic. "We've never faced such a serious crisis from the Gulf countries before," he says. "All the time now, people are returning from there."

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